Mitigating Global S upply Chain R isks through Corporate S ocial R esponsibility (C S R )

Transcription

1 Mitigating Global S upply Chain R isks through Corporate S ocial R esponsibility (C S R ) Click to edit Master subtitle style Jose M. Cru z U niversity of Connecticu t, S torrs, U S A I N FOR M S A N N U A L M EETI N G A ustin, Texas N ovem ber 10-14, 2010

2 Outline of Presentation CS R - Definitions and Terminology Core CS R Issues Globalization and CS R CS R as R isk Management Tool CS R -Multi-S takeholder Global S upply Chain Model R esults Managerial Insights 22

3 CS R - D efinitions and Term inology Business in the Community defines CSR as: a company s positive impact on society and the environment, through its operations, products or services and through its interaction with key stakeholders such as employees, customers, investors, communities and suppliers. Many terms used interchangeably Corporate social responsibility Corporate citizenship Social programs / social investments Community outreach / social outreach 33

4 CS R S takeholders Current drivers Consumers NGOs Trade unions Media Shareholders Risk reduction Brand Reputation 44

5 Core CS R I ssues 55

6 W hy is CS R R ising Globally? Rapid globalization of businesses Human right abuses, misconduct, ecological damages etc. Continued business scandals and misconduct on global basis Diversified stakeholders and growing concerns over corporate behavior and misconduct Proliferation of Internet and increase in media campaign have accelerated situations AUSTIN, 66

7 CS R Globally No. of CSR related Articles covered by Newspaper in Japan No. of Articles Year Corp. Ethics CSR (Based on Nikkei Telecon21) Newspapers: Nikkei, Nikkei Sangyou, Nikkei Ryuutsuu, Nikkei Kinyuu, Asahi, Yomiuri, Sankei, Nikkan Kogyou 77

8 CSR Pressure 88 MEETING-AUSTIN, TEXAS 2010

9 L eadership, M arket Positioning or just m ore Greenw ashing? Striving to buy, sell and use environmentally friendly We understand that our responsibilities products. go beyond regulation. This is why we have a multi-functional approach to environmental issues throughout the company. - From Chevron Canada Website Beyond Petroleum 99 MEETING-AUSTIN, TEXAS 2010

10 W hat are I m pacts on Com panies? Growing discussions, government actions, legislation and CSR standards/codes and etc. Expanding assessment and monitoring on CSR Socially Responsible Investment (SRI) Growing stakeholder activism (NGOs as watchdogs for companies) Integrated into supply chain management CSR has become a global business issue 1010

11 CS R -Expanded R isk M anagem ent Poverty Terrorism Environmen t Social Governanc e Geopolitica l Regulatory Currency Misc. Disease 1111

12 CS R & S upply Chain Factors: Legal requirements Pressure from consumers Changing consumer preferences Results: Attempt to minimize their emissions Produce more environmentally friendly products Establish sound recycling network systems Managing the corporate social responsibilities of their partners within the supply chain 1212

13 CSR & Supply Chain Operational benefits realized by improving environmental and working conditions performance Lower energy cost Less waste Increased productivity Improved safety Decreased turnover and training cost Brand risk management 1313

14 CS R R esearch Them es From 1953 to 1970: Responsibility of the businessman (Bowen, 1953). From 1970 to 1980: Characteristics of socially responsible behavior ( Davis, 1973; Carroll, 1979) In the 1980s: Stakeholder theory (Freeman, 1984) Business ethics (Frederick, 1986 Corporate social performance (Drucker, 1984) In the 1990s: Empirical studies attempted to correlate CSR with financial performance (Clarkson, 1991; Waddock and Graves, 1997; Berman et al., 1999; Roman et al., 1999) Today CSR is: A prominent research theme Found in corporate missions and value statements (Svendsen et al., 2001) 1414

15 Global Supply Risk Model CS R as R isk M anagem ent Tool 1515

16 Global S upply Chain N etw ork M odel 1616

17 A ssum ptions of the M odel Establishing levels of social responsibility activities incurs some costs. Higher levels of social responsibility activities Reduce transaction costs Reduce demand side risk Reduce supply side risk Social Risk Multicriteria decision-makers Manufacturers and retailers try to: Maximize net revenue Minimize risk 1717

18 Features of the M odel Captures multi-tiers Manufacturers Retailers Captures interactions among individual decision-makers Competition at the same tier Coordination among different tiers The model captures : Supply-side risks Demand side risks Social risks Exchange rate risks Determines Production quantities, shipments, price levels of CSR activities 1818

19 M anufacturer s Problem The expect production cost function The expect social risk function The maximization Problem Maxim ize: 1919

20 R etailer s Problem Random demand with Probability distribution News vendor model: Excess supply (inventory) Excess demand (shortage) Expected Value Total expected 11/13/10 penalty INFORMS ANNUAL 2020 INFORMS ANNUAL MEETING-

21 R etailer s Problem The expected social risk function The maximization problem AUSTIN, 2121

22 The M arket S tochastic Econom ic Equilibrium Conditions 2222

23 The Equilibrium State Definition: The equilibrium state of the network is one where the flows between the tiers of the network coincide and the product transactions, levels of social responsibility activities, and prices satisfy the sum of the optimality conditions and the equilibrium conditions. The equilibrium state is equivalent to a VI of the form: 2323

24 I have established Qualitative Properties Existence of a solution to the VI Uniqueness of a solution to the VI AUSTIN, 2424

25 Com putational S tudies The effects of CSR cost on levels of CSR The effects of levels of CSR on: transaction costs supply side risks demand side risks social risks The effects of levels of CSR on: product prices product transactions 2525

26 R esults AUSTIN, 2626

27 The Perceived Benefits of Good CSR Risk management Staff recruitment and retention Cost reductions Enhanced reputation and image Market access Relationships with government, other businesses, stakeholders 11/13/10 INFORMS ANNUAL 2727 INFORMS ANNUAL MEETING-AUSTIN,

28 M anagerial I nsights CSR in supply chain should be viewed holistically. CSR improvements can lead to economic benefits for companies. CSR can potentially reduce production inefficiencies, reduce cost and risk and at the same time allow companies to increase sales, increase access to capital, new markets, and brand recognition. Managing CSR in a global market is more demanding and requires that it is adapted to and contextualized for specific individual country. AUSTIN, 2828

29 Thank You! Questions? AUSTIN, 2929